Tourism decline puts shivers in Hawaii economy

When the jet aircraft arrived at Honolulu from Chicago recently, it did not take long to unload. For this particular flight, at the start of Hawaii's normally robust summer tourist season, was more than one-third empty.

The empty seats bespeak the impact the national recession is having on Hawaii's mainstay, its tourist industry, which last year pumped more than $2.6 billion into the local economy. After decades of rampant expansion, the industry is in the midst of its first decline in 31 years -- a situation with ripples affecting a broad slice of the state's economy.

Between January and May the visitor count dropped 1.4 percent below last year , paring hotel occupancy rates 6 percent. Resort shop owners complain that their business is hurting; at least three major tour operators have been involved in distress sales; and there is speculation over how long some hotels can stay afloat.

"There's no question that we are looking at a relatively gloomy year," asserts Myrtle Lee, president of the state's second-largest hotel chain, Island Holidays Resorts, a subsidiary of Amfac Inc. "I venture to say the situation may not turn around until next year and that you won't see a fast return for another year and a half or so."

In 1979, just under 4 million tourists visited Hawaii, a gain of nearly 8 percent over 1978. The gain came despite a strike by United Airlines and the temporary grounding of the DC- 10 for safety reasons, both of which seriously cut into the travel business in the spring and early summer.

Predictions for 1980 vary. Ernest Donehower, deputy director of research for the Hawaii Visitors Bureau, the industry's marketing arm, sees the visitor count "down a bit from 1979." Clement M. Judd Jr., executive vice-president of the Hawaii Hotel Association, expects a "slight drop" of up to 5 percent. And others say the count might not go much higher than 3.5 million, the lowest in three years.

The biggest decline so far is among tour groups, whose numbers have plummeted as much as 40 percent. These groups originate mainly from the Midwest, the biggest casualty of the national recession, and the East Coast, the region most sensitive to recently increasing air fares.

Travel by independent tourists -- primarily from the West Coast -- is up slightly, to cushion the blow somewhat, and the number of foreigners -- chiefly Japanese, Australians, and New Zealanders -- is up substantially.

Exacerbating the decline, nearly 5,000 new hotel rooms were completed last year, on the eve of the recession, boosting the hotel inventory more than 10 percent. Occupancy rates, consequently, have dropped considerably. Last year the average declined to about 74 percent. This year, Mr. Judd says, it is expected to plunge again, perhaps as much as 8 to 10 percent. And that is in an industry accustomed to occupancies in the 80s and 90s.

"When you look at June and see [occupancy rates at] large hotel properties running in the 40s and 50s," observes Mrs. Lee, "that's not too keen. For the smaller hotels, you better believe they're running in the 20s and 30s." As a rule, resort hotels must fill between half and three-quarters of their rooms, depending on their cost and financing methods, before they start making money. "There may be a few fire sales by the end of the year," Mrs. Lee suspects.

Three of the state's leading tourist middlemen have already gone out of business as a result of the downturn, unable to raise nearly $5 million in debts owed to hotels and other creditors. The three, Hawaiian Holidays Tours, MacKenzie Tours Hawaii, and Aloha Hawaii Travel, were among the top half- dozen tour operators serving the islands, billing nearly $70 million in business last year.

They were sold early this year to David Elmore, a Chicago businessman who owns an eight-member tour wholesale group, First Family of Travel, and who acquired the three distressed firms for "a nominal consideration," on the condition he keep them in business and fulfill their obligations. While Mr. Elmore says no other deals are in the works, observers feel a number of other local tour operators are in trouble and may not last out the year.

More important, the current decline underscores growing apprehension over the important role tourism plays in the local economy. The industry is by far the largest employer in the islands, contributing more than a quarter of the $10 billion gross state product. The tourist influx, which has quadrupled since 1967, has brought severe social and economic strains and is partly blamed for a sharp rise in crime, especially by local youths against whites and tourists.

The state government's economic policy sees tourism as Hawaii's chief growth industry. In a long-range tourism plan awaiting the Legislature's approval, the government billed tourism as the only industry able to satisfy the expanded job needs of the future.

The current downturn, pinpointing as it does the industry's fragility and vulnerability to outside forces, is prompting many to question that view.